Marketing, advertising & media intelligence

When it comes to corporations, history shows that consumers tend to forgive accidents—and even stupidity. But willful deception is another kettle of fish. And Volkswagen inventing technology to cheat on its emissions tests is about as willful and deceptive as it gets (if it wasn’t so evil, you could almost applaud their inventiveness). So far, it has had a major impact on Volkswagen’s share price (and other car brands’ share prices), it is getting ready for a recall of 11 million cars, billions of dollars in fines are on the cards and the first of what could be many lawsuits have already been filed. Some believe it could bring Volkswagen to its knees. So can the company recover from this reputational car crash? And what can marketers learn from the saga?

Matthew Oldham, who served as chief executive of Cadbury New Zealand during Those Difficult Times and is now a real estate agent in New York, has some experience dealing with a PR crisis. And while he can’t talk specifically about Cadbury due to a confidentiality clause, he can talk generally and he believes a consumer's relationship with a brand is like any personal relationship.

“In the case of a breach of trust there is shock, followed by anger, followed by a need to have a cooling off," he says. "Time is a great healer, so it can be counterproductive doing much more than apologising and correcting any wrongs until consumers have moved out of shock or anger modes. Patience is key, which can be difficult in listed multinationals.”

And he says the trust can be rebuilt by demonstrating you still have the brand and product qualities consumers loved in the first place.

“Innovation, effective advertising of your core virtues etc. Some relationships will be over forever no matter what you do, but most come back eventually and new consumers can be brought on board.”

He says pricing is really only a short term tactic to keep business moving while the crisis plays out. But if you don’t work to rebuild the brand qualities, relying on pricing will wear off and the brand will eventually fail. And in the case of Volkswagen, he believes it is too early to start any advertising charm offensive and "it might take five years for loyal consumers to forgive them".

DDB’s chief executive Justin Mowday spent a few years working on the Volkswagen account before its slightly surprising move to Colenso BBDO (it is now in the process of moving again, with rumours it could be heading to Assignment). And he says it’s a great example of the modern, connected world making a brand pay instantly for its malfeasance and "another piece of evidence to show that brands need to be transparent”.

“You just have to do the right thing. There is no other way around it. The new generation expects companies to do the right thing.”

Some successful business people, money-grubbing psychopathic corporations and Karl Marx might disagree with that statement (as someone said when Martin Shkreli raised the price of the AIDS drug he bought the patent for, 'why isn't he being celebrated for making as much money as possible from his product like all the other capitalists?'). When thinking about Volkswagen’s cheating, I remembered hearing journalist and privacy advocate Glenn Greenwald explaining how he dealt with people who said they had nothing to hide and, so, nothing to fear from government surveillance. He asked them to send him their email log-in and password and he could decide if that was true. Not one person did it because, he says, everyone has something to hide. In life and in business, there is a continuum of truth. And, call me a cynic, but while brands are always going on about the importance of transparency and authenticity, it’s hard to believe any company is completely honest in its marketing. Leaving things out is an art (the fudging doesn't look like it's limited to Volkswagen and there will be a few other companies—like Samsung—wondering if the skeleton in their closet will soon fall out).

Just as fraud is often a gradual process perpetrated by those who are desperate rather than pure, planned evil, principles can be eroded in the quest for growth. Now departed chief executive Martin Winterkorn openly stated that it hoped to become the world’s highest selling car brand by 2018. Some stats show it got there recently, before this scandal engulfed it. But it looks set to move back down the list and, just as it's hard to increase the price of something once it's been reduced, or win back an audience once you've lost it, it's also very hard to climb back up the rankings once you've fallen.

“If you accept that a brand is made up of all the impressions people have of it, how they interact with it, what the headlines say and what the product is like, then this will have a big impact”, Mowday says. Fuel efficiency and low emissions were used as a major selling point, so there will be plenty of disappointment and Mowday says this will call into question all of its marketing claims. Anecdotally, judging by an office survey, the seed of doubt has certainly been sown and perceptions about the brand have changed. And while the modern human is often accused of having a short attention span, if the doubt takes root, as it often does in cases of willful deception like this, those perceptions are really hard to get rid of—just ask McDonald’s about pig fat milkshakes, or the Red Cross about donuts.

“They’ll probably look at it and think they’re buying a lemon and wonder 'is there something they’re not telling me? Does it really go from 0 to 100 in that time?'”

He believes it will have a bigger impact on fleet and rental sales, which make up a big chunk of its revenue (and have kept the Corolla on the top spot in New Zealand), than passenger sales. And he also thinks this could also impact on the German brand as a whole.

He says Volkswagen was a fantastic brand that made pretty damn good cars and pretty damn good ads, so it's a shame to have put that legacy in jeopardy (Adweek says the goodwill VW had built in its brand as a result of all that quality advertising was valued at US$23 billion in 2014). Companies are meant to have systems and processes in place to stop this kind of thing from happening, of course. Volkswagen says the fraud is the result of a small rogue team but others believe it is more systemic (although one of the complaints to the German authorities came from Volkswagen itself). So depending on how far up the chain this deception went, he says advertising can play a crucial role in the rebuilding process and he has seen too many examples of the “unreasonable power that emotional advertising has on people.”

He points to Cadbury's Gorilla ad as an example. Lotto is another example because if you looked at the rational odds, no-one would ever buy a ticket, but advertising helps to sell the dream. He says an FMCG company often has the heft of the supermarkets to help get a tarnished brand back on its feet. But Volkswagen doesn’t have that luxury (and in New Zealand, the local distributors Giltrap Group and, it seems, the local Volkswagen staff, are at the mercy of international HQ—and public perception).

In saying that, he says now is not the time for brand advertising, although he might try something in six to 12 months. Instead, owning up, fronting up and telling the truth through the media, as it has been doing, is the best option at the moment.

“They’ve still got to sell cars this week”, however, so retail ads will still be required (and we noticed one for the Amarok on the Herald’s mobile app recently).

“Just make sure it’s all true,” he says.

One Plus One's Kelly Bennett says he advises clients who are struggling with reputational issues to be mindful of three key things: concern, action and perspective (CAP).

From what he's seen, Volkswagen NZ's general manager Tom Ruddenklau has done a solid job, but hasn't clearly communicated what's being done to solve the problem.

"I also acknowledge that, half a world away from where the key decisions are being made, he may not have much wriggle room to do this in the way he'd like."

Judging by his statements in the Herald, Bennett says Ruddenklau is feeling frustrated about it all, but where's the action?

"At a global level, a change of CEO and some staff dismissals are fine, but what's being done to shore up trust in this country? Where's the empathy and action for local car owners who are feeling short-changed and disappointed? So I'd suggest dialling up the word sorry (which I've seen being used, but sparingly) coupled with a more concerted focus on what can and will be done to placate the concerns held by car owners."

Bennett says Spills and Spin is the definitive chronicle of how BP lost its way as an organisation and mismanaged the crisis that played out in the Gulf of Mexico five years ago.

"It illustrates quite clearly—and you can draw some obvious parallels with VW here—that these sorts of organisational errors of judgement don't just happen overnight. They are created by systemic cultural problems, often developed slowly, over decades, which once highlighted have to be fixed swiftly and seamlessly. But, in massive companies that takes time, and therein lies the problem."

Bennett points to a comment by Tony Blair where he said a major crisis tends to last 11 days of intense public scrutiny, given that's a traditional media life-cycle. So, below are ten crisis management strategies, courtesy of Blair's infamous director of communications, Alistair Campbell.

Know the difference between a crisis and a media frenzy. The former are rare, the latter common.

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